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July 6, 2008 -- Houston Chronicle (TX)

Critics: Prison Labor Hurts Free-World Jobs

Program Allows Companies To Employ Inmates, Operate For Less With Subsidies

By Lisa Sandberg, Houston Chronicle Austin Bureau

Return to Drug War News: Don't Miss Archive

AUSTIN -- The East Texas town of Lufkin was home to one of the biggest manufacturers of tractor-trailer beds in the state until sluggish sales forced the firm, Lufkin Industries, to close its factory earlier this year, displacing 150 workers.

For everyone but the affected employees, the story might have ended as little more than a cautionary tale of what happens when an established business gets squeezed by a smaller, nearby competitor, in this case, Direct Trailer and Equipment Co., which sells an almost an identical product for as much as $2,000 less.

Instead, plenty of people have taken notice of this East Texas labor imbroglio, and some are crying foul.

As it turns out, Direct Trailer produces its tractor beds with cheap prison labor and subsidies from the state of Texas. The company rents space inside the Michael Unit, a 2,900-bed facility in Tennessee Colony, for $1 a year. The state foots the tab on work force health care, too.

The arrangement is part of a federal program that allows select companies to provide paid work experience to select prisoners, as long as the prison operation doesn't eliminate similar free-world jobs nearby. The Prison Industry Enhancement, or PIE, initiative has been operating in Texas since 1993 and includes nearly 400 inmates working in five prison plants across the state.

Companies applying to operate inside the prisons must have outside-prison operations and must pay wages commensurate with those paid for similar work in the same locality's private sector. (Welders make at least $8 an hour in the area where Direct Trailer operates its prison plant.)

Inmates keep about 20 percent of their wages, with the rest going to their dependents, victims, the courts and the state.

Paul Perez, general counsel for Lufkin Industries, said his company paid workers upward of $15 an hour and couldn't compete in an already competitive market against a newcomer who could produce a less expensive product.

"It exacerbated an already difficult situation," Perez said.

Direct Trailer's president, John Nelson, could not be reached for comment.

One state lawmaker, Sen. Robert Nichols, R-Jacksonville, is calling not just for Direct Trailer's state contract to be severed, but he's also questioning the validity of every one of PIE's five prison programs.

Nichols accuses PIE's board, known as the Private Sector Prison Industries Oversight Authority, of approving the contract with Direct Trailer without having the necessary employment data required by the federal government and the board.

He said that when he investigated Direct Trailer's 2005 certification, he discovered that the board compared only overall employment in the area against national employment data without looking at local employment data for "specific skills, crafts or trades," as was also required.

Nichols also said that when he contacted the Texas Workforce Commission, he received a letter last month that said the agency "does not have unemployment data for specific skills, crafts, trades or occupations." The letter was signed by a manager Jesse Lewis, director of external relations.

Nichols said that can mean only one thing: "None of (the programs) are meeting the guidelines."

Kathy Flanagan, presiding officer of the oversight board, acknowledged the board made decisions looking at "only part of the information," but she deflected blame elsewhere. "It's not our responsibility to ask the Texas Workforce Commission how they get their information."

She said in light of the current controversy, the board was now reviewing its policy and procedures.

Such comments are unlikely to satisfy labor officials, who complain that even when the rules are followed, the prison program need only demonstrate no harm to local jobs.

"We think the law needs to be clear: Using prison labor should not result in job losses anywhere, and certainly not in the state of Texas," said Rick Levy, legal director of the Texas AFL-CIO.

Nichols said he will urge the oversight board to amend its rules so that contracts are signed only with companies that can show no jobs anywhere in the state will be affected by a prison operation.

"If you can train a prisoner (in) a trade, I think that's very good. But not if one law-abiding Texan has to lose his job," Nichols said.

Robert Carter, PIE's program administrator, is hoping that the fracas won't lead to the demise of a program that's provided job training and pay to hundreds of inmates, the vast majority of who will one day be released.

He said studies indicate that those who participate in PIE get jobs quicker upon release, earn higher pay and stay in them longer than non-participants.

Perez said his company has been able to rehire most of the 150 laid-off workers from the trailer plant and put them to work manufacturing oil field equipment.

But there are new rumblings from the owner of another East Texas trailer manufacturing firm. Charles Bright, who owns Bright Coop, said his sales are down, and he's wondering if it's because Direct Trailer is selling its product cheaper.

"I'm not opposed to the program, as long as I can rent one of those buildings for $1 a year," Bright said.

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